The LGPS is a defined benefit scheme which means that your pension is calculated using formulas which are set out in law.
Your benefits can be reduced or increased, depending upon your reason for retirement.
The basic formulas used to calculate your pension depend on when you have membership:
From 1 April 2014, the LGPS became a Career Average Revalued Earnings (CARE) pension scheme. CARE pensionable pay is your actual pensionable pay that you pay contributions on. It is used to calculate your pension.
For each scheme year that you are a member, a pension equal to a 49th of your pensionable pay is added to your pension account.
If you are in the 50/50 section of the scheme, a pension equal to a 98th of your pensionable pay is added to your pension account in each scheme year. Find out about the 50/50 section
Your pension account is revalued to keep up with the cost of living. The revaluation rate is the Consumer Price Index (CPI). It is applied in April each year under orders set by HM Treasury. Find out about revaluation of pension from 1 April 2014
Example
Your pensionable pay is £12,000. You are in the main section of the scheme.
The annual pension you build up that year is 1/49 x £12,000 = £244.90
The next year your pensionable pay remains the same therefore you build up annual pension of £244.90 again.
After 2 years, your annual pension built up is £244.90 + £244.90 = £489.80.
Your pension account is revalued to ensure it keeps up with the cost of living.
Your annual pension is calculated by dividing your total membership by 60 and multiplying this figure by your final salary pensionable pay. If your pay has dropped within the last 10 years, find out what happens if you had a reduction in pay
Final salary pensionable pay is based on the previous 365 days. Find out how final pay is calculated. Membership is adjusted if you work part-time. Find out how membership is calculated
Example
Your final salary pensionable pay is £12,000 when you take your pension. You were a full-time member between 1 April 2008 and 31 March 2014.
Your annual pension for this period is 1/60 x 6 x £12,000 = £1,200
Your annual pension is calculated by dividing your total membership by 80 and multiplying this figure by your final salary pensionable pay. If your pay has dropped within the last 10 years, find out what happens if you had a reduction in pay.
Final salary pensionable pay is based on the previous 365 days. Find out how final pay is calculated. Membership is adjusted if you work part-time. Find out how membership is calculated.
Example
Your final salary pensionable pay when you take your pension is £12,000. You were a member between 1 April 2006 and 31 March 2008.
Your annual pension is 1/80 x 2 x £12,000 = £300
In addition, an automatic lump sum is payable. The automatic lump sum for those with membership before 1 April 2008 is calculated as 3 times the annual pension. In this example, the automatic lump sum is 3 x £300 = £900.
Lump sum
You can take a lump sum by giving up some of your annual pension. If you have an automatic lump sum because you have membership before 1 April 2008, you can add to the lump sum by giving up some of your annual pension. Find out about converting your pension to a lump sum
Most members can take up to a maximum of 25% of the capital value of their LGPS benefits as a lump sum. HMRC set tax limits on pension lump sums, known as lump sum tax free allowances. Lump sums across all of your pensions are tested against the allowances. Most individuals will not meet the limits so their pension lump sums are tax free. Find out about lump sum tax free allowances
Further information
Use the calculators on MyPension Online to get an idea of what your pension can be. Create an account or log in to MyPension Online
Use the pension account modeller tool. The pension account modeller is a tool which helps you understand how your pension account works. It shows you how your pension builds up from April 2014 onwards. It does not provide you with an estimate of your pension.